Currency and Economy News

Welcome to MoneyTransferComparion’s economy and currency news section. Our expert economist will be happy to provide you with a free overview of the most interesting things that happened last week in the world of currencies, as well as a prediction for next week’s happenings.

This section is slightly technical. If you need any assistance on international money transfer and how they work please view our FAQ. If you want to understand the basic concept behind how events impact currencies go here, Trade Account is explained here, technical analysis here, and we have also created top list events in history that impacted currencies for your pleasure.

 

In Depth Commentary on Current Events

  1. Our Brexit Survey March 24 – Read for Brexit prediction, by the people and by our experts.
  2. Our UK economy forecast with Boris Johnson as PM
  3. Our “the demise of the pound” series – against the Euro and against the U.S Dollar

Analysis and Prediction:

Date of publication: July 15, 2019 | Author: Tim Clayton

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Last Week’s Summary

World Economic News Review

US 

The headline CPI inflation data met expectations with the annual rate declining to 1.6% from 1.8%, although the core rate increased to 2.1% from 2.0% and compared with expectations of 2.0%. 

The data had some impact in dampening expectations that the Fed would cut interest rates very aggressively with the core rate marginally above target.

Federal Reserve rhetoric dominates 

Testimony from Federal Reserve speakers was extremely important during the week with the principal focus on Chair Powell.

In prepared testimony to the House Finance Committee, Federal Reserve Chair Powell stated that the baseline outlook is for US economic growth to remain solid, but growth appears to have moderated with a dip in investment. Uncertainties surrounding trade tensions and concerns over the global economy had also continued to weigh on the outlook. 

Importantly, he also stated that there is a risk that weak inflation will be even more persistent than the central bank currently is anticipating. Powell also commented that the Fed does not want to get on a road to long periods of low inflation.

What did Chair Powell signal?

In the language of central banks, Powell’s comments were a very strong signal that confidence in the outlook had not improved despite the US-China trade truce. There was also a strong signal that rates would be cut at the late-July meeting, although there was still uncertainty over the magnitude of the cut.

Most other Fed committee members were also supportive of a near-term cut in interest rates as an insurance policy against a sharper than expected global deterioration and negative impact of tariffs. 

Yield trends remain crucial

Expectations of lower US interest rates sapped dollar support during the week. The impact was curbed to some extent by expectations that the ECB would also ease policy and that major global central banks would pursue a policy of very low interest rates.

UK

Latest manufacturing data recorded a rebound for May, although this followed a very sharp drop for April and the overall industrial data remained weak. Similarly, GDP recovered for May, but the second-quarter data overall will be notably weak. 

Bank of England officials again suggested that interest rates could increase slightly if there was a smooth Brexit, but hat the risks of a ‘no-deal’ outcome had increased.

There was further political controversy with Conservative Party leadership candidate Johnson not seen as supporting the UK ambassador to the US after he was strongly criticised by President Trump. Markets remained uneasy over the Brexit risks with the UK currency remaining very fragile despite a recovery late in the week.

Euro-zone

ECB officials continued to suggest that there would be further monetary stimulus if the economy did not show any sign of recovery and markets continued to expect renewed interest rate cuts.

International

The Bank of Canada maintained interest rates at 1.75% following the latest policy meeting.  The bank raised its 2019 GDP growth forecast slightly, but still expressed considerable uncertainty over the outlook, primarily due to the influence of tariffs and global trade.

The overall stance was neutral with the Canadian currency recovering from initial losses.

The Singapore economy contracted sharply for the second quarter with a 3.4% decline which sapped confidence in the outlook.

Next Week’s Forecast & Events

a Men Looking at Economic Forecast

Currency rhetoric important

Markets have been increasingly uneasy over the risk of currency wars as a natural development from trade wars and this could be a key factor during the week ahead.

What are currency wars?

Policymakers want to secure a competitive advantage for individual economies to help support exports, especially when the global economy is struggling. One potential weapon is to look to weaken the domestic currency even though the longer-term impact is liable to be negative. This can lead to competitive devaluations as rival economies keep trying to gain an advantage.

President Trump has been increasingly vocal in complaining over the strong dollar and currency manipulation by the EU and China. There is a possibility that Trump will order the Treasury to intervene and push the dollar weaker. 

These risks will intensify if there is no headway in US-China trade talks. Any attempt to push the dollar weaker would generate a response from other countries.

US

The New York Empire manufacturing index is due for releases on Monday. This will be important after the very sharp dip recorded for June which helped trigger unease over the economy. 

The Philadelphia Fed index is also due for release on Thursday and this index also declined sharply for June. A firm recovery for these indices would offer reassurance over the outlook.

Retail sales data is due on Tuesday, but is liable to have limited impact unless there is much weaker than expected data.

Commentary from Fed officials will be watched closely and there will be a big jolt to markets if there is evidence that the committee is pulling back from a July interest rate cut.

UK

The labour-market data is due on Tuesday with the main focus on average earnings data while latest inflation figures are scheduled for release on Wednesday.

Retail sales data is due on Thursday amid anecdotal evidence from surveys of weak spending.

The data overall will be important in shaping the Bank of England’s August inflation report and will have a significant Sterling impact.

This is the final week of the Conservative Party leadership campaign, but a large shock will be needed to prevent Johnson winning the election.

Sterling valuations are notably attractive on a longer-term view if you believe that a disruptive Brexit outcome will be avoided.

Euro-zone

Comments from ECB officials will continue to be watched closely early in the week, especially as it will be the last opportunity to comment ahead of the July 25th policy meeting. 

International

The latest Chinese GDP data will be released on Monday, together with releases on industrial production and retail sales. Weak data would trigger fresh reservations over the growth outlook, especially after weak imports data last week.

New Zealand’s second-quarter inflation data is scheduled for Tuesday local time and will be very important for interest rate expectations. Subdued data would reinforce pressure for a further Reserve Bank cut in interest rates.

The Canadian inflation data is due for release on Wednesday with the retail sales release on Friday.

Australia will report its latest employment data on Thursday and will be important for interest rate expectations with the Reserve Bank watching the labour market very closely.

Currency Forecast for Next Week

Currency pairSpot 1-week forecast1-month forecast
EUR/USD1.1271.1301.139
USD/JPY107.9108.6107.5
EUR/GBP0.8970.8900.880
GBP/EUR1.1151.1241.136
GBP/USD1.2561.2701.294
AUD/USD0.7010.7060.710
USD/CAD1.3031.3061.295
USD/SGD1.3581.3561.350
USD/HKD7.8257.8107.820
NZD/USD0.6690.6720.680
GBP/JPY135.6137.9139.2
GBP/AUD1.7921.7981.823
GBP/NZD1.8781.8891.903
GBP/SGD1.7061.7221.747
GBP/HKD9.8319.91610.12
GBP/CHF1.2361.2531.278
 timTim Clayton is a market analyst with more than 20 years of experience in the financial markets, with particular focus on currencies. Holds an economics degree from University of New York. Writes for multiple publications including Investing.com and SeekingAlpha so he is on top of all the happening in the world of currencies and macro-economics. 


Information expressed in this article and on MoneyTransferComparison.com as a whole does not constitute as financial advice. If you decide to make any actions based on the information you read, we shall not be held responsible.

 

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